Reformed National Pricing Plan – five key takeaways

The RNP plan is clear that it is there to support the delivery of the Strategic Spatial Energy Plan (“SSEP”), the first iteration of which will show the regional locations or ‘zones’, capacities and timings of electricity and hydrogen production and storage required to meet future energy demand from 2030 to 2050. Government is not planning to wait until the final SSEP pathway is chosen to start developing a combination of agnostic siting and investment levers across the following areas: network build, seabed leasing, planning reform, grid connections, locational charges and generation and storage investment support mechanisms.

The government’s current ‘combination’ preference is for options 2a, 2b and 3 below which each place a different weight on the roles of the connections regime and locational charging mechanisms as the two primary levers that drive siting and investment decisions. All three options involve a new concept of ‘Connection Capacity Thresholds’ which would be ‘informed by but potentially different from’ the zonal capacities for different technologies as set out in the SSEP (the ‘CSNP planning line’).  

• In Option 2 the primary lever is the connections regime, with Connection Capacity Thresholds acting as a strict filter on the volume of connections allocated per technology. Adopting this option would naturally mean a lesser role for locational charges. In Option 2(a) Connection Capacity Thresholds would align with the CSNP planning line, whereas in Option 2(b) the Connection Capacity Thresholds would be set more flexibly at a higher level than the CSNP planning line
• In Option 3 both the connections regime and locational pricing would drive siting outcomes with the Connection Capacity Thresholds set above the CSNP planning line as per Option 2(b) but the locational charging regime and investment support schemes playing a stronger role in incentivising and allocating how much capacity is built within those thresholds 

The government is seeking stakeholder views on the options until 2 June 2026 with the aim of deciding an approach in 2026

The RNP plan amalgamates recently announced and ongoing actions to address constraints in both (i) reducing the volume of constraints and (ii) reducing the price paid to manage constraints. Some notable actions include:

• DESNZ to work with TOs and Ofgem to explore measures to enable accelerated construction schedules for critical transmission works
• All three TOs to roll out Dynamic Line Rating (“DLR”) installations in line with their commitments. DLR provides more accurate, real-time assessments of transmission line capacity to allow more power to flow across the network when conditions allow, reducing the need for curtailment
• ‘Demand for Constraints’ – introducing a long-term constraints management market for flexible demand turn-up that allows NESO to request that demand users increase their consumption during network constraint periods. A ‘Demand for Constraints’ tender is targeted for 2026
• DESNZ to decide (following a recently announced UKRI trial) on whether final consumption levies should be permanently removed from demand turn-up
• DESNZ, Ofgem and NESO to explore how NESO could be more active pre gate closure e.g. through more direct trading or establishing new markets for services pre gate closure with the aim of minimising the level of redispatch required post gate closure

Following NESO’s call for input on balancing and settlement reform, the RNP plan states that the following proposed reforms will likely be taken forward with a final decision planned for the second half of 2026: (i) lowering the mandatory BM participation threshold, (ii) mandating that Final Physical Notifications must match traded positions and (iii) alignment of the market trading deadline with gate closure. 

A decision has not yet been formed on unit-bidding or shortening the settlement period to either 15 or 5 minutes but an initial decision is planned, again in the second half of 2026 possibly alongside a further consultation. 

The RNP plan recognises that efficient use of storage can reduce constraint costs, however it also makes a point to cite NESO’s view that assets can be ‘incentivised to engage in inefficient behaviour during periods of constraint’. To that end, an action in the plan is that by summer 2026 Ofgem will publish initial views on repetitive re-trading (also known as ‘flip flopping’) and interaction with market rules, including the Transmission Constraint Licence Condition. 

Separately the RNP plan states that NESO has developed a methodology to measure skip rates, which it will look to implement in summer 2026. NESO’s 30% average skip rate target from January to June 2026 will also be reassessed following the implementation of grid code modification GC0166.

Finally, the RNP plan confirms that government will not be shifting to a deemed CfD model where CfD payments are based on potential rather than actual output but will instead continue to consider the capacity-based CfD approach (providing generators fixed payments based on installed capacity rather than output).